Apparent Authority: Definition, Cases & Example

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  • 0:04 Definition fo Apparent…
  • 1:34 Case Involving…
  • 2:52 Example of No Apparent…
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Lesson Transcript
Instructor: Jessica Schubert

Jessica is a practicing attorney and has taught law and has a J.D. and LL.M.

After you finish this lesson, you'll understand what constitutes apparent authority. Moreover, you'll examine a case and examples to get a heightened understanding of apparent authority.

Definition of Apparent Authority

Imagine that you want to purchase a car. A man, Angelo, greets you at the car dealership, shows you some cars, takes you on a test drive, and takes your order. He seems to be a salesman by all accounts. You are thrilled because he takes $5,000 off of the asking price. Angelo tells you that your new car will be ready for pickup the next day.

You return to the car dealer and ask for Angelo so you can get your new car. You are told that Angelo is actually a car mechanic and has no authority to bind that deal. However, you reasonably believed that Angelo was a car salesman who had the authority to sell you the car.

Basically, you believed Angelo had the apparent authority to sell you the car. It was reasonable by Angelo's actions for you to think that Angelo was an agent of the owner of the dealership, as he acted like a car salesman. This is known as apparent authority.

Apparent authority is a power to act on another person's behalf so long as certain elements exist. Apparent authority can only occur when the third party (or you, in our example) reasonably infers by the actor's conduct that he had the power to act on behalf of the other person. Furthermore, it must be reasonable to believe that the person had authority, or apparent authority will not exist. Failure to have any of these elements will result in a finding that there was no apparent authority.

Case Involving Apparent Authority

One case involving apparent authority was the 2009 New York case, ER Holdings v. W.P.R. Corp. In this case, an ER Holdings, the plaintiff (or the person filing the lawsuit), entered into a mortgage agreement with W.P.R. Corp. after meeting with a family member of the corporation. The family member never claimed to have any authority to bind the corporation, and during the case, no evidence was presented to demonstrate that they did have this authority. However, the plaintiff felt that he did have apparent authority since he was a family member of the mortgage company's owners.

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